Imagine you have been feeling unusually tired, so you visit your doctor, who performs various tests. Here is the resultant conversation:

Doctor: Based on the results of your tests, you have severe anemia. You don’t have enough healthy red blood cells.
You: What do you recommend?
Doctor: Leeches.
You: But don’t leeches remove blood. How will that help?
Doctor: If you have too many red blood cells, eventually that will cause strokes, heart attacks, embolisms, even death. Excessive red blood cells is not sustainable.
You: But I thought I had too few red blood cells, not too many. Shouldn’t I be taking iron or vitamin B-12 or something?
Doctor. Oh, no. Excessive iron eventually will cause heart attack or heart failure, diabetes mellitus, osteoporosis, hypothyroidism, and a bunch of other symptoms. And too much vitamin B-12 eventually will cause a rare form of acne. Yes, excessive iron and B-12 are not sustainable.
You: When would the adverse effects of adding iron and vitamin B-12 to my diet occur.
Doctor: It’s impossible to say.
You: So what should I do?
Doctor: Leeches.

In summary, your doctor said you have too few red blood cells, then said the usual cures — iron and B-12 — cannot be sustained and will cause many diseases, and instead suggested removing your blood cells via leeches.

Can you draw any parallels with the following excerpt, which essentially expresses the beliefs of today’s economics:

The U.S. federal budget is on an unsustainable path. In the absence of significant policy changes, federal government deficits are expected to total around $5 trillion over the next decade.

Such deficits will cause U.S. government debt, relative to GDP, to rise significantly. Thereafter, as the baby boomers increasingly reach retirement age and claim Social Security and Medicare benefits, government deficits and debt are likely to grow even more sharply.

The scale of the nation’s projected budgetary imbalances is now so large that the risk of severe adverse consequences must be taken very seriously, although it is impossible to predict when such consequences may occur.

Let’s pause to examine exactly what a federal deficit is. A federal deficit is the difference between federal tax collections and federal spending.

Thus, a federal deficit is the net number of dollars the federal government adds to the economy, aka the “private sector.”

Dollars are the lifeblood of our economy. Our economic growth is measured in dollars. Gross Domestic Product (GDP) is our usual economic measure; it is a dollar measure.

Because GDP is a dollar measure, GDP rarely can grow while the dollar supply is falling

This is what economists say, though the facts speak otherwise, as you easily can see from the above graph.

What school of thought deliberately ignores easily obtainable facts in favor of intuitive belief? No, not science. Religion.

Economics is a religion, dressed in the clothing of a science.

Under the conventional view, ongoing budget deficits decrease national saving, which reduces domestic investment and increases borrowing from abroad.

The authors make the amazing claim that adding dollars to the private sector reduces domestic investment. How giving dollars to consumers and to businesses can reduce investment, never is explained, simply because it makes no sense, whatsoever.

. . . and increases borrowing from abroad.

Obviously, adding dollars to the private sector will not cause you or your business to borrow, so we assume the authors mean the federal government will have to borrow.

But the federal government is Monetarily Sovereign. It has the unlimited ability to create brand new dollars, ad hoc, every time it pays a creditor. It never can run short of dollars, unintentionally.

Not only does the federal government (unlike state and local governments, which are monetarily non-sovereign) not need to borrow, but indeed it does not borrow.

Those T-securities (T-bonds, T-notes, T-bills) which supposedly are evidence of borrowing, actually are evidence of accepting deposits in T-security accounts — similar to bank savings accounts.

The government issues T-securities, not to obtain those dollars it can create forever, but rather to help control interest rates, to provide safe dollar investments, and to provide a basis for the dollar being the world’s reserve currency.

The article then follows with pseudo-scientific gobbledegook, which I will try to explain:

Interest rates play a key role in how the economy adjusts. The reduction in national saving raises domestic interest rates, which dampens investment and attracts capital from abroad.

The Fed, not national saving, arbitrarily controls interest rates via the Fed funds rate. Actually, it is interest rates that increase saving rather than the other way around. Capital coming in from abroad is economically stimulative — a good thing.

The external borrowing that helps to finance the budget deficit is reflected in a larger current account deficit, creating a linkage between the budget deficit and the current account deficit.

The reduction in domestic investment (which lowers productivity growth) and the increase in the current account deficit (which requires that more of the returns from the domestic capital stock accrue to foreigners) both reduce future national income, with the loss in income steadily growing over time.

But, wait. The authors express a concern about the “loss of future national income, ” meaning the economy will lose dollars.

But losing dollars is exactly what happens to the economy when the federal government runs a surplus. It is a federal deficit that adds dollars to the economy.

In short, conventional economists decry deficits that add dollars to the economy, while simultaneously decrying deficits they claim will subtract dollars from the economy.

This is science?

The authors of the article then go off on a magical mystery tour of what deficits will cause:

Substantial ongoing deficits may severely and adversely affect expectations and confidence, which in turn can generate a self-reinforcing negative cycle among the underlying fiscal deficit, financial markets, and the real economy:

As traders, investors, and creditors become increasingly concerned that the government would resort to high inflation to reduce the real value of government debt.

The common, nonsense idea is that inflation makes debt easier to pay with cheaper dollars. But so-called federal “debt” consists of T-security deposits, which the government pays off by simply transferring the dollars that exist in T-security accountsback to the checking accounts of T-security holders.

Whether, at the time of redemption, a dollar is “worth” $10 or $0.01 is completely irrelevant. Existing dollars, whatever their worth, are transferred. Period.

The fiscal and current account imbalances may also cause a loss of confidence among participants in foreign exchange markets and in international credit markets, as participants in those markets become alarmed not only by the ongoing budget deficits but also by related large current account deficits.

First, to clarify the gobbledegook, there may be a loss of confidence in a certain currency, but there never is a loss of confidence in “foreign exchange markets.”

Foreign exchange rates are determined by inflation, which in turn, is determined by interest rates and by product scarcity. When a nation raises its interest rates, it increases the demand for its currency. It is said to have “strengthened its currency.”

The U.S. has the financial ability to strengthen or weaken its currency at will, or simply to determine exchange rates at will.

The increase of interest rates, depreciation of the exchange rate, and decline in confidence can reduce stock prices and household wealth, raise the costs of financing to business, and reduce private-sector domestic spending.

Apparently, there are different levels of gobbledegook, because this last paragraph has reached a higher level yet.

“The increase of interest rates” and the “depreciation of the exchange rate” are exact opposites. The effect of increasing interest rates is to increase exchange rates. It’s like saying that increases of demand reduce prices. Total nonsense.

An increase in rates can reduce stock prices, but this does not “reduce household wealth.” Average household wealth is more associated with the total money supply (which is increased by federal deficits), and by the Gap between the rich and the rest(which is narrowed by deficit spending, especially on social programs.)

Incredibly, subsequent paragraphs exceed prevous gobbledegook standards. Here are a few of the “Henny Penny, the sky is falling” excerpts:

The disruptions to financial markets may impede the intermediation between lenders and borrowers

. . . asymmetries in the political difficulty of revenue increases and spending reductions

Oh, the list of problems goes on and on, and yet even a modest bit of scientific research shows these problems absolutely do not happen. How can we be so sure?

History.

Back in 1940, when the Henny Penny’s claimed the federal debt was a “ticking time bomb,“the debt was $40 Billion. And every year thereafter, authors of “learned,” scientific, economics publications have used the “ticking time bomb” example or something similar, to “prove” the federal debt and deficit are “unsustainable.

Today, the federal debt has grown to $14 TRILLION, and we still are sustaining. The ticking time bomb still is ticking, and economists, having learned nothing, still write the same ridiculous articles.

Science changes because of discoveries. Read almost any science book from 100 years ago, and you will find it substantially out of date. And 100 years from now, today’s science books will be obsolete.

What does not change? Religion. The Torah, the Christian Bible, the Koran, all remain quite similar to what they were 100 years ago or 1000 years ago, with only the most minor of linguistic adjustments.

While science is based on evidence, religion is based on belief.

And that is why economics, as currently practiced, is a religion, or at best, a failed science, akin to astrology, phrenology, creationism, homeopathy and a tin foil hat.

Sadly, today, tomorrow, and in the future, you will continue to read the same anti-science about the federal debt. The religious are a stubborn people.

•Progressives think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

As I sit here before my laptop, I wonder yet again, what does it take to convince people of such beneficial truths as:

*The federal “debt” is not “unsustainable,” nor is it owed by taxpayers

*Social Security and Medicare cannot run short of dollars unless Congress and the President will it.

*FICA and all other federal taxes do not fund federal spending. The federal government can spend forever, even without collecting taxes.

I just finished torturing myself with the latest absurdity from the Committee for a Responsible Federal Budget (CRFB), the self-proclaimed “nonpartisan” group composed primarily of rich, old, white, male, right-wingers.

Nonpartisan? Don’t you believe it.

They claim to be “an authoritative voice for fiscal responsibility and an educational resource for policymakers and the general public.” Yet, among their comments are:

“Unfortunately, neither (Presidential) candidate has a plan to make Social Security solvent.”

Fact: Social Security, being a federal agency, cannot be insolvent, any more than other federal agencies — the White House, Congress, the Supreme Court and the U.S. itself — can be insolvent.

CRFB “regularly meets with members of Congress and their staff, and offers practical solutions that can achieve bipartisan support and put the country on a sustainable fiscal course.

The U.S. is 240 years old. In all but a handful of those years, the country has run a deficit. Yet, we have sustained. What then is the meaning of “sustainable”? The CRFB never defines this term, because doing so would reveal the nonsense of it.

“The budget is increasingly being taken up by mandatory programs, crowding out investments in other areas of the budget. Lawmakers should enact both entitlement and tax reforms to return our nation to a fiscally sustainable path.”

“Entitlement and tax reforms” is a euphemism for: Cut Social Security, cut Medicare, cut Medicaid and cut poverty aids, while increasing FICA and other taxes.

The U.S., being Monetarily Sovereign, never can run short of its own sovereign currency, the dollar. Its ability to spend is unlimited, no matter what taxes are collected.

Therefore, federal spending cannot be “crowded out.”

Maya MacGuineas, president of CRFB: “We Can’t Borrow Our Way to Prosperity. Assuming our creditors continue to allow these (high) levels of debt, the CBO estimates that within three decades this will reduce average income by $4,000 per person compared to what it would be if debt were on a declining path. “

Think about it. Do you really believe the CBO (another similarly “nonpartisan” organization) can see 30 years in advance? Let’s get real, here.

See how MacGuinneas spreads the ignorance CBO provided:

So-called federal “debt” actually is the total of deposits in T-security accounts at the Federal Reserve Bank, similar to savings account deposits. In short, bank deposits.

Because the U.S. government, never runs short of its own sovereign currency, it neither needs nor uses these T-security deposits for anything.

T-securities do not benefit the government. They are investments provided to the public. The government could stop selling T-securities (i.e. “borrowing”) tomorrow.

All T-securities could be redeemed instantly, simply by transferring existing dollars from T-security accounts back to the checking accounts of owners. No new dollars needed.

In any event, the Federal Reserve Bank has demonstrated its ability to buy all T-securities (via Quantitative Easing). Thus, there is no legitimate concern about “creditors continuing to allow these (high) levels of debt. The government does not need creditors.

Those are the facts. Now visualize this scenario:

You are a member of a sect. Your rich leader tells you to give her all your belongings and to climb the sacred mountain, to watch the world end at midnight.

So you give her your house, your clothing, and all your personal items, and you climb and wait. Midnight passes, and nothing happens, so you climb back down, naked and impoverished.

A year later, your leader tells you the same thing. You give her what you have left, and you climb again, and again nothing happens. So you climb down again, naked.

This repeats itself, year after year, for more than 75 years.

Think now. At what point in those 75 years will you finally figure out that your rich leader doesn’t know what she is talking about? Or more likely, that your rich leader is taking you for a sucker to steal all you own.

How many times will you allow yourself to be fooled?

We’ve published posts showing that since 1940, and surely earlier, the bribed politicians, media, and economists have been calling the debt and deficits “unsustainable,” a “ticking time bomb,” and a “death spiral.”

Yet, in those 76 years, despite all the false warnings, the debt and deficit have grown, and the economy has grown, and everything is “sustainable” and there is no death spiral, and that “time-bomb” still ticks.

But you have given away your belongings via unnecessary, regressive taxes and benefit cuts, that widen the Gap between the rich and you.

The graph shows that as recently as 1970, the federal “debt” (blue line) was $275 Billion. In just 46 years the debt has risen to $14 Trillion — a gigantic 50-fold increase.

And still, we’ve “sustained” that 50-fold increase. No “time-bomb” has exploded. And we aren’t in a death spiral. In fact, GDP has risen substantially.

So what does it take for the public to awaken?

Will the public continue to believe the rich sect leader, and continue to trudge up and down that mountain, year after year, waiting for the end of the world — meanwhile giving her what they own?

Will the people continue to grow angry at anyone who dares to tell them they are being taken for suckers by the rich?

People, listen: You can have fully funded Social Security and Medicare, while FICA can be eliminated. Student debt and hunger can be eliminated. Housing, medical research, the infrastructure and the ecology all can be improved, and taxes can be cut. The gap between you and the rich can be narrowed. (See the Ten Steps to Prosperity, below.)

Why would you prefer to believe otherwise? The rich rely on you being so beat down you will believe good news always is too good to be true for you.

Don’t let it happen. You deserve what our Monetarily Sovereign government can provide. The rich already take more than their share.

Ten Steps To Prosperity:1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

Popular faith holds that the federal debt is a ticking “time bomb,” ready to explode into inflation and high interest rates, and destroy our economy. Here are a few references, beginning 70 years ago. Note that the language remains the same, down through the years — repeated predictions of a disaster that never seems to come.

Even with the end of the gold standard in 1971, arguably the most significant economic event since the Great Depression, the debt-hawk language never changes — as though 1971 were a non-event.

Sept 26, 1940, New York Times: Deficit Financing is Hit by Hanes: ” . . . unless an end is put to deficit financing, to profligate spending and to indifference as to the nature and extent of governmental borrowing, the nation will surely take the road to dictatorship, Robert M. Hanes, president of the American Bankers Association asserted today. He said, “insolvency is the time-bomb which can eventually destroy the American system . . . the Federal debt . . . threatens the solvency of the entire economy.”

Feb 11, 1960, New York Times: Mueller Assails Rise in Spending: The enormous cost of various Federal programs is a time bomb, threatening the country’s fiscal future, Secretary of Commerce, Frederick H. Mueller warned here today “. . . the accrued liability is a ticking time bomb. Some day someone will have to pay.”

Oct 4, 1983 Evening Independent – The United States and the developed world face a “ticking time bomb” because of the huge foreign debt involving loans to Third World nations

Oct 26, 1983, David Ibata: “ . . . home-building officials called for a commission to propose ways to trim the $200 billion federal deficit. The deficit is a ‘ticking time bomb‘ that probably will explode in the third quarter of 1984,’ said Fred Napolitano, former president of the National Association of Home Builders.

Feb 21, 1984, James Warren: “‘We now hear from them (the Reagan administration) that deficits don’t cause high interest rates and inflation,’ AFL-CIO President Lane Kirkland said. ‘If that’s the case, we’ve suddenly discovered the horn of plenty and should stop worrying and keep borrowing and spending. But I don’t believe it. It’s a time bomb ticking away.”

January 12, 1985, Lexington Herald-Leader (KY):The federal deficit is “a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell, a Louisville Republican, said yesterday.

Feb 17, 1985, Los Angeles Times: We labeled the deficit a `ticking time bomb‘ that threatens to permanently undermine the strength and vitality of the American economy.”

November 28, 1987, The Dallas Morning News: THE TICKING TIME BOMB OF LONG-TERM HEALTH CARE COSTS A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government and our nation’s elderly. The ticking bomb is the growing cost of long-term care.

October 23, 1989, FORTUNE Magazine: A TIME BOMB FOR U.S. TAXPAYERS The government guarantees millions of mortgages, bonds, deposits, and student loans. These liabilities, now twice the national debt, are growing fast.

May 1, 1992, The Pantagraph – Bloomington, Illinois: I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion and growing now at an annual rate of $400 billion per year.

October 28, 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion. Seventy-five percent of this debt is due and payable in the next five years. This is a bomb that’s set to go off and devastate our economy and destroy thousands of jobs.

Dec 3, 1995, Kansas City Star: Deficit is sapping America’s strength. Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.

April 14, 2003: Porter Stansberry, for the Daily Reckoning: The baby boomers are heading into retirement with no savings and no productive companies to support them in old age. Generation debt is a ticking time bomb…with about ten years left on the clock.

October 1, 2004, Bradenton Herald: A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB: Lawmakers approved Bush’s request without cutting federal spending by a penny, thereby fattening the country’s projected record deficit of $422 billion by another $145 billion next year.

May 31, 2005, Providence Journal, Defusing the Medicare time bomb, Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb, set to wreak havoc on the budget and shoot future tax rates sky-high.

April 5, 2006, NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

Dec 3, 2007, USA Today: US debt: $30,000 per American. WASHINGTON (AP): Like a ticking time bomb, the national debt is an explosion waiting to happen.

*July 7, 2011, Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.

[*Added subsequently]

And on and on and on. You get the idea. That time bomb has been on the verge of explosion at least since 1940. Even today, the media, the politicians and sensationalist economists refer to the debt as a ticking time bomb. Please look at the following graph and see if you can find any relationship between deficit spending vs inflation and/or interest rates.

This graph shows there is no predictable relationship between federal deficits vs. inflation and or interest rates.

If the debt is a time bomb, it surely has the slowest fuse in history. The pundits have been wrong, wrong, wrong, all these years. We should understand federal deficits, even large federal deficits, have not caused inflation or any other negative economic effect, and the debt is not a ticking time bomb? It’s an economic necessity. Let us turn away from faith and start to rely on facts.